The Housing Market: Not Your Analyst’s Oldsmobile?

The housing market has Barclays analyst Stephen Kim remembering his first car.

In one of the more interesting analyst notes that has crossed our desks in recent months, Mr. Kim, 44, compares the housing market to his old vehicle, a brown 1972 Oldsmobile station wagon (it looked something like this, he says).

It had enough space under the hood that you could practically stand next to the engine and enough room in back to fit a high school soccer team. The steering was vague, the brakes lazy, and the radio couldn’t play FM stations. About the only thing that did work was the accelerator—but that worked just fine! It was ‘a sleeper’ car—not just because you could fit a queen-sized mattress in the back, but because no one could predict that this bucket of rust would disappear so fast when you laid the hammer down.

Housing’s long-awaited recovery has him recalling his younger days. About “18 months ago, the industry was nothing much to look at: dilapidated foreclosures were flooding the market, home equity had suffered the worst retrenchment in a generation, and housing starts and sentiment were far below historic troughs levels. But after stabilizing in 2012, both new and existing home prices are now accelerating much more rapidly than in the 1990s cycle.”

Barclays

Barclays analyst Stephen Kim

Mr. Kim tells Developments that his dad gave him the vehicle and the engine cracked after it was driven too hard. (That probably won’t happen again. These days, he commutes in a used BMW 335d diesel and he uses a 2005 Dodge Ram pickup on the weekends.)

This walk—or drive—down memory lane came as Mr. Kim upgraded his view on the sector to positive, from neutral. He predicts that home prices, which spent several years in a downward spiral, will climb 10% in 2013 and 8% in 2014. He also points out that developed land is scarce and mortgage rates remain low, helping make buying more affordable than renting in many markets.

As we write today, sales of new homes grew by 1.5% in March after falling the previous month.